Public Meeting Transcripts

Public Meeting Regarding Citicorp and Travelers Group

Thursday, June 25, 1998

Transcript of Panel One

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2 MR. LONEY: Because some of the
3 people on the panel scheduled to testify next
4 are not here, we are going to call people from
5 both Panel One and Panel Two at this time.
6 If David Nocenti, Robert Elliot,
7 Stephen Kaufman, Dannel Malloy and Nellie
8 Santiago-Fernandez could come up, I would
9 appreciate it.
10 I will follow the order that is in
11 the agenda that we sent out. In doing that, I
12 will ask Ms. Santiago-Fernandez, who is the
13 senator from New York State, to begin.
14 MS. SANTIAGO-FERNANDEZ: Good
15 morning. Thank you very much.
16 I am speaking today in favor of the
17 proposed conversion of Travelers Group into a
18 bank holding company, its acquisition of
19 Citicorp and the request for an exemption from
20 divestiture of assets under Section 1842 of the
21 Bank Holding Company Act.
22 I am speaking in both my capacity as
23 an elected official, representing a very poor
24 community in Brooklyn served by Citibank, as
25 well as a ranking member of the State Senate
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2 Banking Committee and as chair of the Senate
3 Democratic Task Force on Banking and Community
4 Reinvestment.
5 This is a merger of truly historic
6 significance. For years, as financial
7 modernization has been debated in Washington
8 and in the states, we have heard of these new
9 all-purpose, one-stop-shopping financial
10 services corporations which would be emerging.
11 Now for the first time we have seen one.
12 This question which must be asked is
13 if permitting the birth of this particular
14 prototype is in the best interest of financial
15 consumers. I strongly believe that the answer
16 to this question is yes.
17 In considering what this new entity
18 can do, I started by considering what Citibank
19 already has done.
20 Citibank maintains several branches
21 in my own senatorial district. Through these
22 branches, the bank not only provides a wide
23 range of basic financial services to my
24 constituents, but also a variety of educational
25 services to help consumers get the most out of
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2 their money. These include both training
3 courses on how to use the latest innovations in
4 computer-banking technology and small business
5 lending seminars targeted to the needs of
6 low-income neighborhoods.
7 It is through these same branches
8 which the new Citigroup will be able to offer
9 my constituents and people all over New York
10 City not fewer banking services, as some might
11 say, but an extended menu of insurance products
12 through their association with Travelers.
13 While some condemn Citibank for branch
14 closings, I have a positive story to tell.
15 Two years ago Citibank proposed the
16 closing of a branch in my own district. My
17 district, as I mentioned, is a low-income
18 neighborhood largely underserved by any other
19 financial institution. I and members of my
20 community appealed to the sensitivity of the
21 bank to preserve this branch, and I am proud to
22 say that the branch is open today.
23 Looking beyond Brooklyn to the larger
24 picture, Citibank has been a rising leader in
25 providing home mortgage loans to minorities.
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2 The Home Mortgage Disclosure Act data from 1990
3 to 1996 shows that the mortgage loan denial
4 rates for minorities nationwide has
5 consistently fallen, meaning more Hispanics and
6 African-Americans are having mortgage
7 applications approved at a greater rate than
8 ever before.
9 Citibank has also been a national
10 leader in providing support for building a
11 self-sustaining community development
12 infrastructure by providing grants and special
13 low interest loans for local organizations
14 specializing in economic development. Nearly
15 all of the CBOs in my district have benefitted
16 from this help, providing us with long-term
17 stability in the community.
18 Citibank even pioneered an extremely
19 innovative form of support for community
20 not-for-profit financial institutions with its
21 Equity Equivalent Program, which enables
22 community development financial institutions to
23 strengthen their balance sheet's very long term
24 and very substantiated debt.
25 It is through all of these activities
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2 that the New York City bank has maintained a
3 satisfactory overall CRA rating with an
4 outstanding rating in community development.
5 The new Citigroup gives every
6 indication that this high level of support will
7 continue but be greatly enhanced by this
8 merger.
9 Citigroup's community reinvestment
10 pledge of $150 billion represents an amount
11 twice the bank's current domestic deposits; a
12 considerable commitment. But it is not the
13 sheer quantity of money which should receive
14 the most attention.
15 Citigroup's proposed program on
16 financial and technological literacy is a very
17 forward-thinking initiative design to help
18 teach young people how to take the widest
19 advantage of the possibilities offered by
20 computer banking. The program will help
21 prepare consumers for the realities of banking
22 in the 21st century.
23 Another new program, one more
24 immediately beneficial to low-income
25 communities, is their Proposed Center for
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2 Community Development Enterprise. This
3 subsidiary will be making loans and providing
4 technical support to community development
5 organizations to provide them with the tools,
6 resources, and knowledge they need to build
7 their own economic development programs. This,
8 I believe, helps bring about true community
9 empowerment.
10 Finally, I have worked on the CRA
11 issue for many years now and I want to remind
12 everyone how historic the commitment made by
13 Citigroup is, especially from the Travelers
14 side.
15 Travelers has promised to make a wide
16 variety of insurance products available in
17 low-income communities utilizing the extensive
18 Citibank branch network. What this will mean
19 is more insurance products will be made
20 available to more people in low-income
21 communities. This is a very significant move.
22 The CRA requires Citibank to invest a
23 portion of its assets in the communities it
24 accepts deposits from, including poor
25 communities. However, there is no similar law
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2 which binds insurance companies.
3 While financial modernization
4 legislation may ultimately include such
5 provisions, Travelers has boldly decided to
6 voluntarily target insurance products to poor
7 neighborhoods, to poor communities, products
8 designed specifically to meet their needs. I
9 believe that this historic commitment has set a
10 standard by which future cost industry
11 financial mergers should be judged.
12 In closing, let me once again state
13 that I support this merger. It represents a
14 natural trend in the financial marketplace and
15 has a vast potential to benefit all financial
16 consumers, poor and otherwise.
17 Thank you very much.
18 MR. LONEY: Thank you.
19 Mr. Nocenti.
20 MR. NOCENTI: Good morning, Officer
21 Loney, Mr. Alvarez, Mr. Hodgetts,
22 Superintendent McCaul. My name is David
23 Nocenti, and I am the counsel from the Office
24 of Queens Borough President Clair Shulman. I
25 want to thank you for giving us the opportunity
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2 to provide our comments this morning.
3 The proposed merger of the Travelers
4 Group and Citicorp raises many complex legal,
5 financial, regulatory, and competitive issues,
6 and I know that you are going to be hearing
7 comments from both sides on many of these
8 issues today.
9 Our expertise does not lie in the
10 analysis of competition or the impact of
11 mergers on markets and so our testimony is
12 going to be limited to your request for
13 information regarding the impact of the merger
14 on the convenience and needs of the community.
15 Specifically, the Queens Borough
16 President's Office has worked very closely with
17 Citibank on numerous issues during the past ten
18 years, and we will provide some background on
19 Citibank's community activities in Queens.
20 Citibank has always been responsive
21 to the needs of our local residents, and this
22 history of cooperation and assistance should be
23 given strong consideration as you evaluate the
24 benefits of the merger.
25 Queens County geographically is the
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2 largest borough in the City of New York and is
3 also the second most populous with almost 2
4 million residents. If Queens County were a
5 separate city, we would be the fourth largest
6 city in the United States behind New York, Los
7 Angeles and Chicago.
8 Queens is also the most ethnically
9 and culturally diverse county in the world with
10 Kennedy Airport serving as the new Ellis Island
11 for the past 50 years. Queens County is the
12 first stopping point for immigrants all over
13 the globe. Over 35 percent of Queens residents
14 were born outside the United States and they
15 come from over 150 countries and speak over 120
16 languages.
17 Queens is primarily a working-class
18 borough. We do not have the conspicuous wealth
19 of Manhattan, and we have the specific needs,
20 economic needs, as in all areas of New York
21 City. There is a tremendous need for
22 affordable housing in Queens, and we also have
23 some of the most overcrowded schools in the
24 country.
25 The borough president is the highest
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2 elected official in Queens, and as a result our
3 office is involved in economic development,
4 housing, education and community projects
5 throughout the borough.
6 We work very closely with our
7 financial institutions and other private
8 businesses and, thus, are uniquely qualified to
9 evaluate the civic participation of these
10 private entities.
11 Citibank has been one of the most
12 active and effective businesses working towards
13 improvements in the borough of Queens. In the
14 area of economic development, Citibank has
15 provided important assistance to small
16 businesses throughout the borough. They have
17 worked closely with the Queens County Overall
18 Economic Development Corporation, the Greater
19 Jamaica Development Corporation, the Jamaica
20 Business Resource Center, the Rockaway
21 Development and Revitalization Corporation, and
22 many other local community development
23 entities.
24 Citibank has provided project grants,
25 has offered technical assistance and has led
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2 the way to helping these organizations and
3 other small businesses to develop and grow in
4 Queens County.
5 Citibank has also been a leader in
6 the area of housing development. As previously
7 noted, Queens County has a great need for more
8 affordable housing, and Citibank has provided
9 the financing necessary for many such projects.
10 Our office has undertaken major efforts to spur
11 the creation of more low-income and
12 moderate-income housing in Jamaica, the
13 Rockaways, and elsewhere in the borough, and
14 Citibank has provided invaluable financial and
15 technical assistance in this effort.
16 Although there are many one-family
17 and two-family homes in Queens, in other areas
18 of the borough the predominate housing stock is
19 apartment buildings. In the early 1980s, many
20 buildings converted from rental units to
21 cooperative ownership, and these co-ops became
22 the only available form of home ownership for
23 many residents in the area.
24 Unfortunately, the New York City real
25 estate market collapsed in the late 1980s. It
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2 left many of these co-ops with serious
3 financial problems. Virtually every bank had
4 lent funds based on overvaluations of the
5 properties, and most of these financial
6 institutions simply stopped lending any money
7 for these co-ops, leaving tens of thousands of
8 apartment owners stranded in apartments they
9 could not sell.
10 The Queens Borough President's Office
11 immediately formed a Co-op and Condo Task
12 Force, comprised of building owners, lending
13 institutions, apartment owners, government
14 agencies, and others, to address the problems.
15 Working with Fannie Mae and Freddie
16 Mac, we brought the necessary parties together
17 and achieved work-outs that allowed the co-ops
18 to avoid defaulting on their loans. Although
19 several financial institutions chose not to
20 participate in this collaborative effort,
21 Citibank was an integral player in the process
22 and helped us to save the homes of tens of
23 thousands of individuals.
24 In addition to its active role in
25 economic development housing, Citibank has also
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2 been a good corporate citizen working closely
3 with not-for-profit groups throughout Queens
4 County. Indeed, Citibank was instrumental in
5 saving several financially-troubled
6 organizations, included in the Jamaica Arts
7 Center and the Queens Symphony Orchestra.
8 Citibank provides technical and
9 financial assistance to many community groups
10 and cosponsors many events held in the borough.
11 In addition, for the past several years
12 Citibank has sponsored a bus tour for
13 foundations and other charitable organizations
14 which has helped our Queens group to access
15 additional funding sources that traditionally
16 have been providing grants only to
17 Manhattan-based organizations.
18 Citibank is also very active in
19 education issues. Citibank has formed
20 partnerships with several New York City
21 elementary schools. They work closely with the
22 City University of New York and St. John's, and
23 Citibank employees act as mentors to individual
24 students.
25 Moreover, a Citibank employee was
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2 recently named as the borough president's
3 appointee to the seven-member New York City
4 Board of Education, which is responsible for
5 overseeing the education of over 1 million
6 school children in New York City.
7 Finally, it is important to note that
8 Citibank is one of the largest employers in
9 Queens County with over 3,500 employees in the
10 borough. The construction of the Citibank
11 Tower, which opened in 1990, helped to initiate
12 a revitalization of the Court Square area, and
13 they have provided funding for amenities above
14 and beyond what were initially requested of
15 them.
16 In sum, the Borough President's
17 Office has had a close working relationship
18 with Citibank for many years, and we have found
19 them to be excellent corporate citizens. They
20 are very responsive to the needs of the
21 community. They have been eager to join in
22 public-private partnerships and have provided
23 tremendous financial and technical assistance
24 which has helped us to revitalize significant
25 areas of the borough.
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2 Thank you once again for providing
3 this opportunity to testify today, and we hope
4 that the Federal Reserve Board's evaluation of
5 the benefits of this merger will include
6 consideration of Citibank's long history of
7 working to assist and improve businesses,
8 housing, education and cultural institutions
9 throughout Queens County.
10 MR. LONEY: Thank you.
11 Mayor Malloy.
12 MR. MALLOY: I am Mayor Dannel
13 Malloy. I'd like to begin by thanking you for
14 the opportunity, as the Mayor of Stamford,
15 Connecticut, to testify on behalf of Citibank.
16 Stamford is the Connecticut
17 headquarters for Citibank. Since the bank
18 opened its first of seven branches only four
19 years ago, I have been impressed with the
20 bank's commitment to be a major community force
21 in Stamford and within the State of
22 Connecticut.
23 As the Mayor of the fourth largest
24 city in Connecticut, with the third largest
25 concentration of Fortune 500 corporate
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2 headquarters in the country, I know firsthand
3 that corporate partners like Citibank are vital
4 to continued urban growth.
5 If such Citibank current activities
6 are a reflection of broader available resources
7 that result from the Citicorp/Travelers Group
8 merger, then I can only look forward to
9 stronger partnerships with the proposed
10 Citigroup in Stamford and throughout the state.
11 To illustrate the depth of the bank's
12 commitment to the community, I would like to
13 highlight three key areas of creative
14 initiatives that Citibank has led.
15 First of all, I'd like to speak about
16 education. Citibank and the City of Stamford
17 share a personal commitment to the excellence
18 of public education for children of all ages.
19 Citibank has partnered to spearhead two
20 Stamford school readiness programs. These
21 programs promise that all Stamford children
22 will have an opportunity to be ready to learn
23 before entering school.
24 The initiatives are the Hillandale
25 Child Development Center. This will be the
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2 first program in the State of Connecticut to
3 fully integrate state-of-the-art learning
4 strategies with health, nutrition, and
5 parenting modules in a childcare environment
6 for preschool children. In fact, the City of
7 Stamford will guarantee all of its 4-year-olds
8 pre-K experience, that is, prior to the time
9 they would enter our kindergarten.
10 Secondly, Success By 6. Citibank is
11 a key member of the Leadership Council.
12 Success By 6 will ensure that all children
13 entering kindergarten do, in fact, enter with
14 the foundation needed to prepare them to
15 succeed in school.
16 In addition to the above educational
17 activities, Citibank has adopted the Hart
18 Magnet School Read-A-Loud program; received
19 major awards for junior achievement of
20 Southwestern Connecticut in connection with
21 their educational activities; funded Connect
22 '96, which established Internet access for both
23 of our high schools in Stamford; and developed
24 and implemented a summer associate program with
25 The Urban League of Southwestern Connecticut,
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2 which is based in Stamford.
3 The second key area is human and
4 social services. Citibank helped plan and fund
5 with the City of Stamford United Way and
6 Infoline, the Infoline Referral Center. The
7 center is a unique staffed storefront operation
8 offering community agency information, access
9 to caseworker services and job shopping through
10 a Department of Labor kiosk.
11 The referral center is the result of
12 the partners concern that people moving from
13 welfare to work needed a place to connect with
14 local, regional and statewide agencies that can
15 help them become self-sufficient.
16 Secondly, Cheryl Adkins Green,
17 Citibank F.S.B. president, will serve as the
18 chair of the United Way of Stamford, 1998-99
19 fund-raising campaign, which will raise over 2
20 million for local agencies. This is another
21 example of the personal commitment Citibank
22 senior management demonstrates in our community
23 every single day.
24 The third key area, access to credit
25 for low- and moderate-income areas and
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2 household. Citibank is an active lender in all
3 Stamford neighborhoods. The bank has made
4 substantial inroads in the enterprise zone with
5 small business loans to help retain jobs and
6 help businesses grow.
7 Additionally, the leadership of the
8 community development loan program is
9 well-recognized. The bank became a pacesetter
10 two years ago for new Connecticut banks, which
11 it committed $1 million to the Housing
12 Development Fund for affordable housing in the
13 city and directed more than $2 million in
14 community development investments to
15 Bridgeport, Norwalk, and Stamford.
16 Citibank loans have extended to
17 statewide initiatives, including a $2 million
18 loan for the Connecticut Preservation Loan Fund
19 and an approval to fund $3 million for a
20 childcare loan fund this month.
21 Citibank knows that money alone
22 cannot build neighborhoods. Therefore, in 1995
23 the bank helped establish the Fairfield County
24 Local Initiative Support Corporation office,
25 located in Bridgeport, and serving all of the
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2 state, in particular Fairfield County and the
3 City of Bridgeport, Norwalk and Stamford.
4 I would like to conclude my testimony
5 with the benefits of the proposed merger for
6 the community of Stamford and the State of
7 Connecticut.
8 Unlike the traditional in-market bank
9 merger that I have seen in Connecticut, where
10 physical locations overlap and savings are
11 achieved by consolidation, the formation of
12 Citigroup is different. The merger will not
13 eliminate available resources as other mergers
14 have; rather, the combination will greatly
15 increase the value and convenience for
16 customers through offering access to a broader
17 range of high-quality financial services and
18 products, all from one convenient location in
19 Stamford and other Connecticut locations.
20 Additionally, the wide range of
21 products and services offered by the combined
22 company will add breath and depth to the career
23 opportunities in Connecticut. The stronger
24 company will mean more jobs to my community.
25 As I stated at the beginning of my
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2 testimony, I believe that the merger of
3 Citicorp and Travelers Group will only enhance
4 the bank's deep commitment of human and
5 financial capital to the City of Stamford and
6 to the State of Connecticut.
7 Thank you.
8 MR. LONEY: Thank you.
9 Assemblyman Kaufman.
10 MR. KAUFMAN: Good morning. I am
11 Assemblyman Steve Kaufman. I represent the
12 82nd Assembly District in the Bronx, which
13 includes Co-op City, Throgs Neck, Westchester
14 Square and Eastchester Gardens.
15 I am here today to tell you that
16 Citibank has demonstrated again and again its
17 commitment to the social and economic
18 well-being of the Bronx, and as the borough
19 undergoes a renaissance in many of its
20 neighborhoods, Citibank has been there to play
21 a major role.
22 Citibank has focused its resources,
23 technical assistance, leadership, and grants to
24 foster the business development, home
25 ownership, comprehensive economic development
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2 and educational programs to school children,
3 high school students, and college students, as
4 well as welfare-to-work participants.
5 Citibank fervently seeks to ensure
6 that the unique needs of senior citizens are
7 not only met, but also exceeded through
8 superior service and customer satisfaction. In
9 fact, Citibank's work with legislators like
10 myself and community leaders have led to
11 innovative and creative initiatives that have
12 resulted in safer, more convenient alternatives
13 to accomplish their banking.
14 For example, while responding to the
15 need for greater education around direct
16 deposit and familiarity with using the phone
17 for banking, Citibank also discovered and
18 responded to the need for transportation
19 services and protection against con games.
20 In response to concerns expressed by
21 seniors in the Pelham Manor/Co-op City area,
22 Citibank offered to present its consumer
23 education series to seniors on a range of
24 issues from how to use ATMs and PC Banking; how
25 to access basic checking; how to call into its
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2 phone service and speak with a representative;
3 and how to protect themselves from con games.
4 Citibank consumer educators worked
5 one-on-one with seniors to teach them what to
6 watch for and how to protect themselves.
7 Through the consumer education
8 program, Citibank has also worked one-on-one
9 with senior citizens who travel to Puerto Rico
10 and Florida.
11 Many seniors were not aware that
12 Citibank offers free bill payment service
13 through its 1-800 service line. In one
14 instance, a senior was able to avoid surcharges
15 on her rent when she was in Puerto Rico by
16 having Citibank pay her bills.
17 Overall, Citibank consumer educators
18 have conducted over 600 seminars in English and
19 Spanish, 20 percent of which were conducted in
20 the Bronx in senior citizen centers, schools,
21 hospital and locals businesses.
22 Beyond the bricks and mortar of its
23 branches, however, Citibank uses the strength
24 of its human resources to invest time,
25 leadership, and technical assistance to
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2 community groups and residents.
3 In my own district, Citibank's staff
4 has volunteered for the 45th precinct Night Out
5 Against Crime, and other health fairs in Co-op
6 City and Throgs Neck, assisting the creation of
7 KidCare ID cards for hundreds of area school
8 children. Citibank has also cosponsored with
9 me a wonderful bus trip for senior citizens who
10 are brought to an all-day picnic and barbecue
11 in Sunken Meadow Park.
12 As another example of Citibank's
13 responsiveness, the staff at the Castle Hill
14 Avenue branch found out that I was sponsoring
15 the city teddy bear drive for physically and
16 emotionally abused children who were brought
17 into Montefiore Child Protection Center and
18 immediately took up my cause and collected over
19 200 teddy bears for these children. These are
20 the kind of wonderful people that are the
21 backbone of this institution.
22 Citibank has worked hand-in-hand with
23 many community associations in my district on
24 numerous different issues. Citibank has also
25 participated in Read Aloud programs in schools
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2 in my district and has also taken part in a
3 clothing drive for people making the transition
4 from welfare to work. In my community,
5 Citibank has surely made a difference.
6 In the Bronx last year, through its
7 Partnership In Progress program, Citibank
8 committed 150,000 to the three creative and
9 innovative community development corporations
10 for the creation of affordable housing,
11 commercial stores and community revitalization.
12 In conclusion, for 25 years Citibank
13 has had a long-standing commitment to improving
14 the quality of life in the communities it
15 serves. It is clear from these activities in
16 my assembly district and also those throughout
17 the Bronx that Citibank demonstrates its pledge
18 to CRA by providing access to the highest
19 quality financial services and products, making
20 them available to everyone regardless of where
21 they live and how much they earn.
22 I look forward to continuing my
23 office's participation with Citibank to effect
24 positive change in the Bronx.
25 MR. LONEY: Thank you.
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2 Mayor Robert Elliot.
3 MR. ELLIOT: I would like to briefly
4 add my comments with respect to Citibank's
5 community development activities.
6 I am Bob Elliot and Mayor of
7 Croton-on-Hudson; until a few weeks ago,
8 president of New York Conference on Mayors. I
9 am here as the chairman of an eleven-community
10 organization known as Historic River Town.
11 Historic River Town is a
12 representable eleven communities, extending
13 from the New York City border northward nearly
14 50 miles, from the City of Yonkers to the City
15 of Peekskill, representing a population of
16 nearly a quarter of a million people.
17 A number of years ago, these
18 communities came together in the midst of a
19 severe recession to address economic problems.
20 We couldn't wait for the state or the federal
21 government to help us wrestle with these
22 problems, particularly with the limited
23 resources that we had. We were wrestling with
24 a recession unlike no other that we had
25 encountered in the past. We had both blue
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2 collar workers and white collar workers out of
3 work, facilities such as GM closing, and IBM
4 downsizing, affecting our community. We needed
5 to build on what we had, address our downtown
6 and mainstream problems, and our focus became
7 tourism.
8 Beneath this was the broader economic
9 development and the regional planning, and we
10 formed Interest Municipal Agreement, a
11 nonprofit organization, and a number of
12 public-private partnerships which have now
13 become models for other areas throughout the
14 State of New York.
15 From the very beginning, Citibank's
16 community development division understood what
17 we were doing. They grasped the concept when
18 no others did. They understood the
19 complexities and the interdependencies of our
20 economy, with such issues as transportation and
21 housing as relates to the environment and
22 relates to our community.
23 Citibank's assistance extended way
24 beyond the grants for a number of programs,
25 programs which involved a number of the area
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2 branches, programs which involved community
3 planning, community meetings and several
4 planning conferences which, for example, last
5 week ended up at a planning conference using a
6 bottom-up process where we laid out nearly 50
7 miles of waterfront development plans along the
8 Hudson River coastline, Westchester County.
9 More important was the expertise and technical
10 assistance that Citibank gave us and,
11 particularly, the high standard to which they
12 have held us, a standard to which we are still
13 trying to reach.
14 Citibank's community development
15 efforts made a tremendous difference in our
16 eleven communities and a significant difference
17 in the Hudson Valley.
18 I thank you for the opportunity to
19 testify this morning.
20 MR. LONEY: Thank you.
21 Are there any questions for the
22 panel? Thank you very much.